The unexpected postponement of the Supreme Federal Court's (STF) ruling on the collection of Property Transfer Tax ( ITBI ) on the contribution of real estate to real estate holding companies has reignited tensions between families and companies that use real estate holding companies.
The case, which was about to be decided in favor of taxpayers, has returned to square one after a request for a hearing in person. At the same time, it has opened a strategic window for those who intend to appeal to the courts before the final decision, a move that could have a billion-dollar impact on municipalities and redefine the asset planning of investors.
“At the last minute, everything came back. Everyone was surprised by the 4-1 lead, and it seemed like we had won. Now the apprehension returns,” says Manoela Vargas, head of wealth planning at TAG Investimentos .
The decision has general repercussions, which will oblige all municipal tax authorities to follow the final understanding. More than 90 cases have already reached the final instance and are awaiting this judgment, in addition to dozens of others that were still in preliminary stages.
At the same time, the postponement reinforced the perception that there is still a window to seek judicial intervention before the final decision.
“This is one of the most important rulings of the year. It directly impacts families who invest in real estate through companies, holding companies, but also construction companies and the entire market that manages real estate,” says Camila Bacellar, partner in the tax area at Cescon Barrieu. “It was a cold shower, but it shouldn't be seen as a bad sign.”
According to experts consulted by NeoFeed , if the Supreme Court validates the taxpayers' argument, the Court is likely to limit this benefit based on a specific timeframe, through modulation, to avoid a multi-billion dollar impact on municipal coffers. This possibility is fueling the rush to the courts, potentially greatly increasing the number of beneficiaries of the decision.
If the Supreme Court rules in favor of taxpayers but modulates the effects, the benefit may be restricted to those who already have a lawsuit in progress. This combination of a favorable outcome, postponement, and the risk of modulation has led families to revisit transactions made in recent years and consider filing a lawsuit.
“The debate centers on whether this tax incidence would be covered by a constitutional tax immunity. We are very optimistic about a decision in favor of taxpayers based on what the ministers have voted so far, which makes the current moment a unique window of opportunity,” says José Antonio Martho, partner at CGM Advogados.
It is possible to file a lawsuit up to five years after paying the tax. Therefore, anyone who paid the ITBI (Property Transfer Tax) within that period is eligible to seek a refund.
“If a person files a lawsuit now, they can go back to a real estate transaction they made in 2021. They can't go back further than that,” says Angélica Santos, tax lawyer and partner at CGM Advogados.
What is being discussed?
Holding companies are increasingly popular tools used for tax efficiency and estate planning, even among families with only three properties.
The law does not provide for the application of ITBI (Property Transfer Tax) on the transfer of real estate from one individual to another, but there is an interpretation that, for a legal entity with real estate purposes, such as holding companies, the tax would be due, which makes these structures more expensive.
The interpretation is ambiguous so far. On one hand, municipalities argue that companies with real estate activity are not protected by tax immunity. On the other hand, taxpayers claim that the Constitution did not limit the contribution of capital in these cases and that the tax collection is based on a broader interpretation than the constitutional text allows.
A decision favorable to taxpayers would not only eliminate the tax going forward, but could also benefit those who already have lawsuits pending, potentially generating billions in expenses for municipalities. The ITBI (Property Transfer Tax) rate varies between 2% and 4% of the property value, depending on the municipality.
The point to note is that the change to in-person voting is not merely procedural. Now there will be oral arguments, debate among the justices, and a new formation of the Court's opinion. In practice, this prolongs the uncertainty, because the votes can change.
“There is uncertainty because the judgment resets everything and anything can happen. The score was favorable to the taxpayers, but that is not a guarantee after the amendment. It is not what is expected, but the Court may change its mind and the other ministers may have a different understanding,” says Barcellos, from Cescon Advogados.
ITBI (Property Transfer Tax) can be retained on the excess value.
Even in a scenario favorable to taxpayers, the dispute may not close all lines of discussion. This is because a relevant question remains regarding the exact scope of the immunity: the tax base.
In practice, this point makes a difference in structures where the market value of the property exceeds the amount contributed to the company's capital. In this case, even if the Supreme Court rules out the tax on the contribution, there may still be room to tax the portion that exceeds that value.
“The interpretation by the municipalities is that the exemption extends only to the limit of the share capital, what has been fully paid up. And not the market value, which is generally higher and the basis for the ITBI (Property Transfer Tax),” says Mariana Pavani, head of wealth planning at Fami Capital . “And that’s a major asterisk that isn’t being discussed.”
This excerpt shows that, even with a positive decision, the outcome will not automatically standardize all structures. The legal design of each transaction, the way the property was contributed, and the amount allocated to share capital will remain central to future analyses.
“The most concerning point today is the scope of the immunity. Municipalities have created a legal argument to limit this reach, and this could keep part of the discussion open even with a favorable decision. We foresee an increase in litigation on this issue,” says José Dumont, head of family office solutions at Brainvest.
The risks involved
For families who have already filed lawsuits, the assessment is that their position is comfortable if the Supreme Court recognizes the immunity and modulates the effects. In this scenario, those who litigated before the final judgment would certainly recover the ITBI (Property Transfer Tax) paid unduly or avoid its collection in future transactions.
For those who haven't yet filed a lawsuit but are considering taking advantage of the window of opportunity, there are risks. The Supreme Court could set the date for the modulation earlier than expected, such as the start of the first trial. In that case, those who filed later would be excluded from the benefit.
But lawyers consider this scenario less likely, especially since the virtual trial was annulled and will have to be redone entirely.
“This is a case that I am absolutely certain will be subject to modulation. But, with the annulment of the virtual trial, the tendency is that this deadline will respect those who have already filed a lawsuit up to the new decision of the Supreme Court,” says Martho, from CGM Advogados.
Regarding the timeline for resuming the trial, the expectation is that the trial will not resume in the short term. The assessment is that it is unlikely to return to the plenary session this semester and could even drag on into 2027, which widens the window for taxpayers who are still considering taking the matter to court.
But the unpredictable can happen, and the vote could resume as early as the second semester. Therefore, the recommendation is to act quickly. "I believe the ideal scenario would be to finish the semester with the lawsuit filed," says Santos, from CGM Advogados.
Holdings lose some of their appeal.
The ITBI (Property Transfer Tax) ruling adds to a broader discussion that has been gaining traction among high-net-worth families, estate planners, and wealth managers: real estate investment remains attractive, but the structure used to support it now requires more careful consideration.
While real estate holding companies once seemed almost a natural solution for combining governance, succession planning, and tax efficiency, this equation has now been further pressured by new fiscal and regulatory variables.
The structure had the drawback of being subject to municipal tax, but it guaranteed the collection of 14.5% income tax on earnings, instead of the 27.5% for individuals, which compensated financially.
However, with the tax reform , holding companies will become subject to IBS and CBS contributions, which could raise the total tax rate to 28%, eliminating the difference compared to individuals. Exclusive real estate funds are subject to the same interpretation.
“Brazilians like to invest in real estate. There is a preference for tangible assets. There is still interest in this product, in real estate holding companies, but today there are several new problems, such as dividends, IBS and CBS. The ITBI exemption could come as a relief,” says Vargas, from TAG.
This doesn't mean that the appetite for the asset class has disappeared, but rather that the market has begun to more carefully review whether the holding company structure remains, in all cases, the best path forward.
“The scenario has changed. Today it is not clear that a holding company is a good instrument from a tax perspective. Perhaps it only has advantages for taxpayers with a larger volume or who are actually focused on succession planning,” says Dumont, from Brainvest.
In practice, planners believe that the decision has become less dependent on a ready-made formula and more dependent on an individualized calculation that takes into account the cost of the structure, the impact of the property transfer tax, the assets involved, and the family's succession goals.
“We need to do the math and see if the tax and inheritance benefits will outweigh the additional costs. If so, then we should set up a company,” says Pavani of Fami Capital.
At the same time, the market began to look more closely at alternative structures. Among them are real estate investment trusts (REITs), which are exempt from income tax. Therefore, some families have been selling their properties in exchange for shares as a way to maintain exposure to the sector with a different tax and operational logic.
